Wells Fargo's Top Picks

Post Reply
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Wells Fargo's Top Picks

Post by dan_s »

Amongst large caps WPX, CLR and EQT stand out in terms of well
productivity momentum (See Exhibit 1). We note, that with longer
production histories from 4Q18 vintage wells and ~105 new wells with
production data, all three of our top picks – WPX, FANG and APC –
showed an improvement in their Well Productivity Momentum scores.
Also, EOG and NBL continue to have scores below 1.000, which
suggests a decrease in well productivity. In the SMID cap space,
JAG, MTDR and SM stand out as have the best productivity
momentum with improved scores based on more 4Q18 vintage well
data. While LPI and ESTE showed some improvement in their scores,
they are still well below 1.00.

 After updating our E&P Investment Framework for recent price
movements and the well productivity data, we make no changes to our
ratings. Our Top Picks remain FANG, APC and WPX. We would note
that PE and PXD dropped slightly in our forced rankings, while CXO and
CLR moved slightly higher amongst the large caps.
Amongst the SMIDcap E&Ps, we continue to prefer JAG, ESTE, SM and WLL.

Wells Fargo has "Outperform" ratings on CXO, CLR and PE. If you think oil prices are going higher, then CLR is the Top Pick here because none of their oil is hedged and they should report strong production growth in SCOOP/STACK in 2H 2019. Based on my forecast/valuation model, if CLR's realized oil price is $60/bbl in 2020 they should generate over $4.00 EPS and close to $12.00 Operating Cash Flow Per share. CLR is on-track to report over $800 million of FREE CASH FLOW FROM OPERATIONS IN 2019.

If you want to see the Wells Fargo report, send me an email and I will forward it to you: dmsteffens@comcast.net
Dan Steffens
Energy Prospectus Group
Post Reply